Wednesday, March 08, 2006
New HDB resale levy may hit private home market, benefit executive condo
SINGAPORE : Latest changes to the HDB resale levy system may have a negative impact on the low-end private home market but could potentially benefit the executive condominium segment.
That is according to property consultants that Channel NewsAsia spoke to.
The government announced last week that it was standardising the resale levy imposed on HDB homeowners who sell their first subsidised flat to buy another.
Under the changes announced, the HDB resale levy will be fixed at between $15,000 and $50,000 depending on the size of the flat.
Previously, it was pegged at between 15 percent and 25 percent of the flat's market value.
According to consultants, the change translates to cost savings for homeowners, which could amount to as much as about $40,000 for an executive flat.
And they are generally positive about the impact of the new levy on the HDB market.
Analysts say lower resale levies may encourage more transactions in the HDB primary market and reduce the current backlog of unsold new flats, estimated at some 9,000 units.
This could also benefit the HDB resale market, which has seen the bottoming out of prices since the fourth quarter of last year.
But there are concerns that the change might hurt the lower end of the private residential market.
That is because, with the lower levy, potential HDB upgraders might see value in buying another HDB flat rather than a private home.
And the executive condominium market is one sector that will potentially benefit.
"I think that this change in the resale levy is expected to have a positive impact for the executive condominium market. This is because for HDB upgraders who are thinking of moving into a new executive condominium unit, you have to pay a resale levy. But with the reduction of the resale levy, it would encourage more to do so," said Nicholas Mak, director of Consultancy and Research at Knight Frank.
While the changes to the levy system are generally welcomed, analysts say there is scope for further fine tuning.
"I think that one way to fine tune this scheme is to impose a levy only on those who have enjoyed capital gains when they sell their flats and are buying their second one from the HDB. There are some owners who are currently incurring capital losses, so why should they be hit twice especially they are in financial difficulties and need to downgrade," said Mak.
After two quarters of decline, HDB resale prices posted a 0.4 percent rise in the fourth quarter of last year.
- CNA /ls
That is according to property consultants that Channel NewsAsia spoke to.
The government announced last week that it was standardising the resale levy imposed on HDB homeowners who sell their first subsidised flat to buy another.
Under the changes announced, the HDB resale levy will be fixed at between $15,000 and $50,000 depending on the size of the flat.
Previously, it was pegged at between 15 percent and 25 percent of the flat's market value.
According to consultants, the change translates to cost savings for homeowners, which could amount to as much as about $40,000 for an executive flat.
And they are generally positive about the impact of the new levy on the HDB market.
Analysts say lower resale levies may encourage more transactions in the HDB primary market and reduce the current backlog of unsold new flats, estimated at some 9,000 units.
This could also benefit the HDB resale market, which has seen the bottoming out of prices since the fourth quarter of last year.
But there are concerns that the change might hurt the lower end of the private residential market.
That is because, with the lower levy, potential HDB upgraders might see value in buying another HDB flat rather than a private home.
And the executive condominium market is one sector that will potentially benefit.
"I think that this change in the resale levy is expected to have a positive impact for the executive condominium market. This is because for HDB upgraders who are thinking of moving into a new executive condominium unit, you have to pay a resale levy. But with the reduction of the resale levy, it would encourage more to do so," said Nicholas Mak, director of Consultancy and Research at Knight Frank.
While the changes to the levy system are generally welcomed, analysts say there is scope for further fine tuning.
"I think that one way to fine tune this scheme is to impose a levy only on those who have enjoyed capital gains when they sell their flats and are buying their second one from the HDB. There are some owners who are currently incurring capital losses, so why should they be hit twice especially they are in financial difficulties and need to downgrade," said Mak.
After two quarters of decline, HDB resale prices posted a 0.4 percent rise in the fourth quarter of last year.
- CNA /ls
// posted by Shajahan @ 1:57 PM 